File Picture: REUTERS
File Picture: REUTERS

The rand was firmer against major global currencies on Wednesday morning, only slightly paring gains after disappointing local consumer inflation data for May.

Inflation rose 4.5% year on year in May, slightly higher than Bloomberg's 4.4% forecast, but in the middle of the Reserve Bank's target band of 3%-6%.

The inflation data is being closely watched amid expectations the Bank will cut interest rates at its July meeting, due to tepid economic growth and an accommodative global environment, as major central banks are sending dovish signals.

The rand had surged almost 2% against the dollar on Tuesday, after European Central Bank president Mario Draghi said policy makers were willing to cut interest rates should inflation fail to pick up in the eurozone.

Sentiment was further boosted by US President Donald Trump's announcement he would be meeting with Chinese President Xi Jinping next week. President Cyril Ramaphosa also announced that plans for Eskom would be unveiled soon.

At 10.05am on Wednesday the rand had gained 0.22% to R14.4922/$, 0.19% to R16.23/€ and 0.21% to R18.2037/£. The euro was flat at $1.1199.

Focus now shifts to the US Federal Reserve policy statement later, with markets anticipating the Fed will also say it is willing to loosen monetary policy in order to respond to slowing US growth.

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The state of the nation address (Sona) on Thursday will also be closely watched in terms of messages regarding state-owned enterprises as well as growth-enhancing measures.

The good news should be priced in for the most part, but short-term knee-jerk reactions can be expected leading up to and during the events of the Fed announcement and Sona over the next two days, Peregrine Treasury Solutions corporate treasury manager Bianca Botes said in a note.